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A practical update on charitable contributions

In an earlier Pottscast™, we related some of the rules that the law imposes in order to be able to deduct a charitable contribution. One of those rules is that for contributions exceeding $250, the giver must obtain from the charitable organization a “contemporaneous written acknowledgment containing the amount of the contribution and other required information concerning the terms of the gift.”

In a decision handed down in 2012, in Durden v. Commissioner, the Tax Court ruled that Mr. and Mrs. Durden, of Texas, were not entitled to deduct the $22,517 they contributed to their church, Nevertheless Community Church (NCC).The IRS ruled that the Durdens, although they had provided records of their contributions, including copies of canceled checks and a letter from NCC dated January 10, 2008, which acknowledged contributions from them during 2007 totaling $22,517, were not entitled to the deduction.

The National Philanthropic Trust (www.nptrust.org), in its analysis of “The History of Giving”, identifies 347 BCE as the date of one of the earliest known acts of philanthropy, when Plato, in his will, left his farm to a nephew, with instructions that the proceeds be used to support students and faculty at the academy he founded.

Giving continues: in our own time, the Trust believes that in 2011, Americans gave $298.3 billion to charities, a 3.9% increase from 2010. By any measure this is a great deal of money, and a wonderful thing. And of course, much of it will have been tax deductible.

To achieve a tax deduction for a contribution to charity, you must follow certain rules set forth in the Internal Revenue Code, and interpretations of it by the Internal Revenue Service. In a recent release, the IRS set out “Nine Tips on Deducting Charitable Contributions,” all of which are basic and for the most part are of long standing, but we think it’s worth your time to review them.